Question

Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate that:
1. if Canada were to allow trade, it would export hockey sticks.
2. Canada has an absolute advantage, relative to other countries, in producing hockey sticks
3. Canada has a comparative advantage, relative to other countries, in producing baseball bats.
4. All of the above are correct.

Answer 1

Answer:

3. Canada has a comparative advantage, relative to other countries, in producing baseball bats.

Explanation:

Comparative advantage is the ability of the country to produce good or services for a lower opportunity costs for example the oil producing countries have comparative advantage in chemicals.

Options 1,2 and 4 are incorrect .

Absolute advantage is the ability of a country or region to produce greater quantity of units with the same no of inputs in the same time.